COVID-19 sees 50% drop in SME loans requested: loan
The volume of funds requested by SMEs halved in Q420, according to SME lending platform Lend.
After reviewing the figures for applications, loan amounts funded, and loan approvals from affiliate partners (including brokers and accountants) since COVID-19, fintech Lend Capital (Lend) found that the applications and funded loans had fallen dramatically over the past few months.
According to Lend’s data, total funds requested through the platform in Q420 (ending June 30, 2020) stood at $ 252,679,227 – a dramatic drop from the previous quarter, when $ 433,909,012 had been requested.
The number of claims also declined in the June quarter, dropping 46%.
Lend also found that while the volume of loans requested had fallen by 41% in a quarter, the actual number of loans financed had decreased by 82% (or 71% in dollar terms).
In addition, compared to the same period last year (when $ 499,483,229 in loans were requested through the platform), the volume of loans has halved (49%).
While there has been a decrease in requests across all industries, Lend found that hair and beauty, retail and hospitality were the hardest hit, with requests falling by 60% between quarters of March and June.
Speaking to The Adviser, Lend CEO Bill Baker said he believed the dramatic drop in requested and approved funds was due to the coroanvirus pandemic that took hold in March 2020 and subsequent changes in risk appetite among lenders.
Mr Baker said: “When we talk about loaned funds, we think that [drop] is due to the uncertainty of the current environment; lenders are even more focused on risk and their ability to recover loaned funds. “
The CEO also echoed recent sentiments that the government’s SME guarantee scheme was in principle welcome, but did not go far enough to help non-bank lenders lend money cheaply.
“Non-bank lenders welcomed the support of the SME guarantee scheme and the recognition of the ‘alternative’ lending sector, but they still had to produce the funds to lend and received no relief on receiving funds to lend at a reduced rate, ”said the CEO.
“In a constantly changing environment, lenders have had to constantly review their credit policies and risk appetite, and they have had to do it in real time.”
Noting the drop in funds demanded by small businesses, Baker suggested that government incentives, such as JobKeeper, could help keep businesses afloat, but added that “many business owners are just stepping on the line. water until they can see a clear path ”.
He concluded: “We are optimistic for the next quarter, and early indicators are already showing improvement despite the unfortunate circumstances facing the Victorians.
“Our lenders are getting creative in how they can provide funds to Australian SMEs and this is also a promising proof of confidence that the Australian economy will rebound and, as always, [do so] thanks to the strength and value of small businesses. “
Donelle Brooks, third party manager at Lend Capital, added that brokers have a key role to play in ensuring SMEs are aware of their financing options at this time.
She told the advisor, “Brokers are actively trying to raise funds for their clients, while also managing the impacts of COVID-19 on their own businesses.
“Education is essential, it is essential to understand the different types of products that their clients can exploit to access equity. Brokers are starting to use platforms or technologies like the Lending Platform, which takes the guesswork out of the broker and can often provide multiple options to match clients’ circumstances.
“Brokers play such a vital role in finding solutions for business owners, with a significant increase in the number of resi brokers moving into the commercial space to provide ‘one-stop-shop’ solutions to their clients,” Ms Brooks said.
Lend’s figures echo trends seen in recent Sensis Company Index – which found that more than a quarter of the 1,015 companies surveyed in the first week of August had been “pushed back” by credit providers, and an additional 36% were having difficulty obtaining credit.
Annie Kane is editor-in-chief of The Adviser and Mortgage Business.
In addition to writing about the Australian brokerage industry, mortgage market, financial regulation, fintechs and the broader credit landscape – Annie is also the host of Elite Broker and In Focus podcasts and The Adviser Live webcasts. .